BHAVI PLATING SYSTEMS P.LTD,MUMBAI vs. ITO WD 6(1)(4), MUMBAI

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ITA 7607/MUM/2016Status: DisposedITAT Mumbai12 June 2019AY 2012-137 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the share premium was received in earlier years and credited in the books of accounts of those years, no addition under Section 68 could be made in the current assessment year. The allotment of shares was done in the current year, but the receipt of premium was in prior years.

What were the facts?

The assessee received share premium in earlier assessment years, but the Assessing Officer (AO) made an addition for the current assessment year under Section 68, treating it as unexplained cash credit. The CIT(A) confirmed this addition.

What were the issues?

Whether share premium received in earlier assessment years and credited in those years can be added as unexplained cash credit in the current assessment year when shares were allotted in the current year.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

For Appellant: Shri Sameer Dalal, AR

AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM: This appeal filed by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-12, Mumbai [in short CIT(A)], in appeal No. CIT(A)-12/ITO-6(1)(4)/77/15-16, dated 20.10.2016. The Assessment was framed by the Income Tax Officer, Ward-6(1)(4), Mumbai (in short ITO/ AO) for the A.Y. 2012-13 vide 2 order dated 25.03.2015, under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).

2.

The only issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO of share premium receipt of ₹ 1,11,75,000/- being unexplained cash credit under section 68 of the Act. For this assessee has raised the following ground: - “The learned Commissioner of income-tax (Appeals) has passed an order against law & facts of the file in as much he was not justified to arbitrarily uphold the action of the Ld. Assessing Officer in making an addition under section 68 being unexplained cash credit of ₹ 1,11,75,000/- on account of unexplained share premium in fact receipt was in earlier assessment years..”

3.

Briefly stated facts are that during the year under consideration, the assessee allotted 37,250 shares. The assessee has received share application money and share premium year-wise as under: - “Fin year Asst. year Amount 2003-04 2004-05 62,70,000 2004-05 2005-06 7,50,000 2009-10 2010-11 78,80,000 Total 149,00,000”

3 The AO noted the details of share application money receipt for the period of 01.04.2003 to 31.03.2006 and 02.04.2009 to 31.03.2010 and noted that the assessee has received share application money from 23 different parties amounting to ₹ 70.20 lakhs from 23 parties for the period of 01.04.2003 to 31.03.2006. The AO also noted that the assessee has received share application money as on 31.03.2010 in the name of 17 parties amounting to ₹ 1.49 crores. But the AO was under presumption that the amount of premium received by the assessee from various shareholders is during the year under consideration amounting to ₹ 1,11,75,000/- and according to him which is unexplained. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) confirmed he addition by stating that the assessee is unable to prove the identity, creditworthiness of the investors and genuineness of transactions. The CIT(A) given factual finding in Para 7.3 and the relevant portion read as under: - “7.3 On perusal of the decision of Hon’ble Jurisdictional ITAT in the case of Rita Stephen Pinot, it is seen that the issue involved is with respect to the unsecured loan. The lender in that case is NRI from long time and said loan was received in FY 1997-98 and the assessment year under consideration is for AY 2005-06. The fact of this case is totally different, i.e. the loan were not received during the year in that case. But, in the instant case the appellant has credited the amount as share application 4 money of ₹ 1,11,75,000/- during the year under consideration only and no opening balance was on account of share application money was credited. (as per balance sheet as on 31.03.2012). therefore, case law cited by the appellant is not found applicable here.”

Aggrieved, now assessee is in appeal before Tribunal.

4.

We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the facts and arguments of both the sides and the facts are that the assessee had allotted 37,250 shares at a premium of ₹ 300 per share to different parties. The application money for the same was received as mentioned hereunder: - “Return of income for the year under appeal was filed on 20.09.2012 declaring loss of ₹ 27,600/-. Assessed income ₹ 1,11,47,400/- addition made ₹ 1,11,75,000/-.

During the year under review, the appellant had allotted 37,250 shares and received premium ₹ 84,75,000/- (total share premium receipt as on 31.03.2012 ₹ 1,11,75,000/-) year-wise bifurcation of receipt of application of money is as under:

5 F.Y. A.Y Amount As per Ld. AO 2003-04 2004-05 62,70,000 70,20,000 2004-05 2005-06 7,50,000 2009-10 200-11 78,808,000 1,49,00,000 Wrongly mentioned in the assessment order 1,49,00,000 As stated above, receipt towards shares & premium received in earlier years. During the year, outstanding balance under the head share application money transferred to ₹ 37,25,000/- share capital & ₹ 11,75,00,000/- towards share premium account.”

5.

It was stated by the assessee that the equity shares of 37,250 of ₹ 100 each at a premium of 300 per share making total face value of the shares of ₹ 400 of each share. The AO issued notice under section 133(6) to the parties, who filed reply to the notice and the details are as under: - Sr. Name of the party Remark No. 1. Vasant K Gada Share application money is paid in FY 2003- 04. Band statement not enclosed. 2. Uday K Gada Share application money is paid in FY 2003- 04 & FY 2009-10. Bank statement not enclosed. 3. Praful K Gada Share application money is paid in FY 2003- 04. Bank statement not enclosed. 4. Lilwati Hirji Vora Share application money is paid in FY 2003- 04. Bank statement not enclosed. 5. Hirji Ratanshi Vora Share application money is paid in FY 2004 (HUF) & 2011. Bank statement not enclosed 6. Hirji R Vora Share application money is paid in FY 2003- 04 and 2009-10. Bank statement not enclosed. 7. Velji K Joshi Notice under section 133(6) not served. The appellant stated that the party was out of station. The appellant filed bank statement

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